Stafford Loan for US Students

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Student loan is one of the financial aid which helps the students in pursuing their educational dreams. Student loan plays a vital role in achieving higher education goals and helping students in paying their essential college fees and other educational expenses. Students repay their loan borrowed after completion of their studies and getting a job.

There are two types of loans which can be availed by US students. These are Private student loans which are financed by private lenders or by the educational institutions where the students undergo education and the Federal student loans which are provided by the federal government. Federal student loans are more beneficial to students as its rate of interest may be low or free.

Stafford Loans are one of the Federal student loans offered to college and university students. In the honor of U.S. Senator Robert Stafford for his work and contribution on higher education, Congress in 1988 renamed the Federal Guaranteed Student Loan program to the Robert T. Stafford Student Loan program. Stafford loans may be subsidized by the U.S. Government or unsubsidized depending on the student’s need. Stafford Loans can be used to cover a student’s total Cost of Attendance (COA) which typically includes tuition, room and board, books and other education-related expenses required by the university. Both on and off-campus housing can be covered by Stafford Loans. As of July 1, 2012, only unsubsidized Stafford loans are available to graduate students and however, subsidized Stafford loans are still available for undergraduates.

Subsidized loans: Subsidized Stafford loans are awarded based on financial need. The federal government “subsidizes” (or pays) the interest during these times and students will not be charged interest before beginning repayment or during periods of deferment.

Unsubsidized loans: These are based on financial need. Any eligible student can take out Unsubsidized Stafford Loans. Interest accrues from the time the loan is disbursed, to the time the loan is repaid in full.

Stafford Loan Eligibility: Applicants must be a U.S. citizen or national, a U.S. permanent resident or eligible non-citizen. They must have accepted for enrollment or attending a school that participates in the Federal Family Education Loan Program. Furthermore applicants must have submitted a FAFSA to be eligible for a Stafford loan. For subsidized Stafford, students must have financial need as determined by their school. Applicants must be enrolled or plan to enroll at least half time.

Stafford Loan Benefits: The fixed interest rate is one of the most important benefits of Stafford Loans. The interest rate will remain fixed for the life of the loan until repayment is complete. Rates have been fixed to 3.4% for subsidized undergraduate stafford loans, while their unsubsidized complements have a fixed rate of 6.8%. It also includes some added remuneration of No credit check, No payments until after graduation and Increased borrowing limits – up to $20,500 per year depending on degree status and years in school.

Stafford Loan Fees: Stafford loans that have been disbursed on or after 7/1/2010 carry a 1.0% origination fee.

Repayment options for a Stafford Loan: The standard repayment term for this loan is 10 years but students may be able to extend repayment by deferring or consolidating the loans. The following options are available:
-The Standard Repayment Plan which requires paying a fixed amount each month based on principle and interest but will be no less than $50 or the interest that has accrued.
-The Graduated Repayment Plan allows students to make a monthly payment that starts out low and then increases over time until the loan is paid in full. The required monthly payment is calculated on loan debt and interest rate, but it will never be less than the amount of interest that accrues each month.
-In Income-Based Repayment Plan, students can make monthly payment on the basis of their yearly income and loan amount. Payments may change as the income varies.
-The Extended Repayment Plan is for borrowers with loans of more than $30,000. This plan offers a choice of fixed or graduated payments over a period of up to 25 years.

How to apply for Stafford Loan:
Complete the FAFSA or Renewal FAFSA (for returning students).
-Receive financial aid award letter from school in the mail or by email. This letter will state all the financial aid students are eligible to receive including the Stafford Loan.
-Contact financial aid office to accept loans.
-Sign any associated paperwork such as the Master Promissory Note (MPN)
-Once the above steps are completed, school will disburse the funds in student’s account each semester.

Stafford Loan application deadlines: Stafford Loan application is the Free Application for Federal Student Aid (FAFSA). FAFSA deadlines differ by both state and school, though application season typically runs from January 1 through June each year. Hence, there is no specific deadline to request Stafford Loans once application is submitted.

Stafford Loan is the most common student loan usually availed by the US students. It not only helps the students but also improve the credit rating of students. So, without worrying for their educational expenses, students can fulfill their educational dreams.

Further information on Federal Stafford Loans can be found by following this link.

Priyanka Gupta

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